Mortgage Rates continued lower today, marking the third consecutive day at new all-time lows. Broader Bond Markets continued to benefit from a generally skeptical and negative outlook on the European debt crisis. That skepticism helped push the European currency to it's lowest levels in over 2 years, also exerting downward pressure on stock prices and bond yields.
When bond yields fall, it's generally true that mortgage rates will be falling as well (though there are notable exceptions). Indeed that was the case today as the secondary market snapped up MBS ("mortgage-backed-securities") aggressively. MBS are similar to bonds and are the most important underlying factor in the mortgage rate market. If demand for them is high, prices rise and yields fall. Although there are other factors that determine lenders' rate sheets, falling MBS yields translate to falling rates.
We make the distinction between the price and yield (or interest rate) tonight because so often, the day to day movements in rate sheets cannot be seen at the interest rate level. They're usually too small for that. Instead, mortgage markets move every day on the PRICE side of the equation, which essentially means that investors are paying more or less for the prevailing interest rates. That's why we say rates are at new all-time lows even though you're not as likely to see a different interest rate being quoted. Instead, the improvement vs. yesterday would be seen in the form of lower closing costs or a higher credit from the lender depending on your scenario.
(Read More:What is A Best-Execution Mortgage Rate?)
Long Term Guidance: We'd continue to advocate against trying to "get ahead" of current market movements due to the high degree of uncertainty. While it's a reasonably safe assumption that European concerns will generally help rates stay lower than they otherwise would be, that "otherwise would be" part is very much a moving target. Best bet is to focus on the fact that rates are at their all time lows, and can change quickly based on events that aren't "scheduled" or able to be forecast. Risk vs reward for floating vs locking looks a bit larger than we'd like, but not out of the question for those who understand the risks and have an exit strategy if things don't go their way.
Loan Originator Perspectives
Bob Van Gilder (BVG), Finance One Mortgage
Who's to say that our 10 YR T can't mirror Japan's? The higher the MBS move, the clearer the" fun house" mirror becomes. Please do not get lulled into thinking mortgage rates will be 2%, 2.5% etc at some point. Your thinking should tell you to take advantage of what is available today. Tomorrow never comes.
Brett Boyke, Senior Mortgage Banker, Wintrust Mortgage
How much lower can rates actually get at this point? A better question may be - are you willing to gamble that they will?
Aaron Meyer, Mortgage Officer, First Bank Financial Centre
Mortgage rates continue to slowly march on like the Titanic floating through the cold ocean but remember it only took one iceberg to sink her, and with an eventful end of the week it might only took one economic iceberg to sink these great rates.
Victor Burek at Benchmark Mortgage
I am still advising all clients to float til within 15 days of closing. However, today's rate sheets are awesome and there is nothing wrong with locking if within 30 days. Longer term closings should continue to float but stay in touch with your loan officer.
Julian Hebron, Branch NManager, Loan Agen, RPM Mortgage
If rates continue in this current range, it's best to take the record lows while they're here. Just make sure you know the rules of the road so your rate lock doesn't get blown during the process. Here's something I wrote for MortgageNewsDaily last summer which is still highly relevant for those considering refinancing: Refi Roadmap: A Locked Rate Isn't A Closed Loan
Today's BEST-EXECUTION Rates
- 30YR FIXED - 3.5% - 3.625%
- FHA/VA -3.5% - 3.75%
- 15 YEAR FIXED - 2.875% - 3.00%
- 5 YEAR ARMS - 2.625-3. 25% depending on the lender
Ongoing Lock/Float Considerations
- Rates and costs continue to operate near all time best levels
- Current levels have experienced increasing resistance in improving much from here
- Rates could easily move higher or lower, but given the nearness to all time lows, there's generally more risk than reward regarding floating
- But that will always be the case when rates operate near all-time levels, and as 2011 showed us, it doesn't always mean they're done improving.
- (As always, please keep in mind that our talk of Best-Execution always pertains to a completely ideal scenario. There can be all sorts of reasons that your quoted rate would not be the same as our average rates, and in those cases, assuming you're following along on a day to day basis, simply use the Best-Ex levels we quote as a baseline to track potential movement in your quoted rate).